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Aareal Bank AG

Investor Presentation • Mar 31, 2011

11_ip_2011-03-31_7607d12a-4e81-4ad6-af03-89e7a07ec741.pdf

Investor Presentation

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March 31, 2011Dr. Wolf Schumacher, CEO – Hermann J. Merkens, CFO

Agenda

  • 2010 at a glance
  • B/S structure & funding position
  • Asset quality
  • Outlook
  • Mid-term perspective
  • Appendix
  • Definitions and Contacts

2010 environment Aareal Bank's point of view

Positive effects

  • Stabilisation of major economies
  • Some booming Emerging Market Countries
  • Bottoming out of several CRE-markets
  • Less competition due to withdrawal of competitors
  • Higher margins
  • More equity in deals

Negative effects

  • Euro crises burdens funding markets
  • Inflation fear arises
  • Regulatory environment
  • Macro-economic imbalances

… to be continued in 2011!

2010 at a glance

2010 at a glance Outperforming targets due to operative strength

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Aareal Bank is well positioned to increasingly exploitpresent market opportunities for its credit business

1) Advanced internal ratings-based approach (advanced IRBA)

2010 at a glance Outperforming 2010-guidance

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Structured property financing New business with attractive risk-return profile

Consulting / ServicesSolid in IT & volumes – weak in deposit margins

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IT-Business (Aareon Group)

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  • Continuously successful development of Wodis Sigma since introduction in 2009
  • Large scale SAP implementations still suffering from reduced implementation projects as anticipated
  • Acquisition of SG I automatisering bvstrengthens the international business of Aareon

Deposit taking business (Aareal Bank)

  • Aareal sustains its position as the house bank of the German housing sector
  • Longer than originally expected low interest rate environment impacts net interest income
  • Deposits increased to € 4.1 bnon a FY average (~ € 4 bn in 2009)

B/S structure & funding position

Solid capital and Tier 1 ratios

Tier 1 capital1) (AIRBA 2)) as at 31.12.2010

Leverage ratio 3)

  • 1) After confirmation of Aareal Bank AG's financial statements 2010. The inclusion of retained earnings transferred as part of Aareal Bank AG's liable equity as at 31. December 2010 is subject to approval by the Annual General Meeting.
  • 2) Advanced internal ratings-based approach (advanced IRBA)
  • 3) Gross IFRS numbers (particularly no netting of derivatives)

9

  • € 17.663 bn risk weighted assets
  • Good position to achieve at least a target Core Tier 1 ratio acc. Basel III between 8% - 9% by 2013
  • Additionally SoFFin's silent participation is grandfathered until 2018

Refinancing situation 2010Flexible use of unsecured and secured funding

  • Pfandbriefe:
  • -€ 2.4 bn
  • Senior unsecured:
  • -€ 1.5 bn
    • € 2.0 bn SoFFin-Bond 2010 onto own books and therefore not shown

Asset- / Liability structure according to IFRSAs at 31.12.2010: € 41.2 bn (31.12.2009: € 39.6 bn)

Refinancing situationDiversified funding sources and distribution channels

  • Aareal Bank has clearly reduced its dependency upon wholesale funding
  • At the beginning of 2002, long term wholesale funding accounted for 47% of overall funding volumes – by Dec 31st 2010, this share had fallen to 29% (or even 11% without Pfandbriefe)

Asset quality

Total property finance portfolio High diversification and sound asset quality

Development property finance portfolioDiversification continuously strengthened (in € mn)

Property finance under management

Total property finance portfolio NPL-level stabilising with constant coverage ratios

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1) Incl. property finance portfolio still on DEPFA'sbalance sheet

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are allocated specific loans in most cases

16

Treasury portfolio€ 12.3 bn of high quality assets

Outlook

Global market size Transaction volumes are rising again

Attractive business opportunities

  • Aareal has the chance to capture attractive business opportunities in different countries and property types
  • Highly selective in choosing its risks in order to meet desired risk/return profile

Higher transaction volume and less competitors on a lot of markets give plenty of opportunities for cherry-picking business

Source: CBRE, Jones Lang LaSalle* expected

Outlook - Aareal Bank's market expectationsExpected average of market value changes across allcommercial real estate property types and regions in 20111)

North AmericaUp:Mexico

North AmericaStable:

  • Canada
  • USA

1) The individual market value of a single property may vary, change end 2010 to end 2011

Outlook

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1) As in 2010, the bank cannot rule out additional allowances for credit losses

On track in Q1 2011

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s

Promising deal pipeline

  • Based on our current deal pipeline and our current capital basis we are confident to meet at least € 5 - 6 bn new business target in 2011
  • We are constantly analysing our options to realise the chances our deal pipelines is offering and write significantly more new business

Mid-term perspective

Outlook - Aareal Bank's market expectationsExpected average of market value changes across allcommercial real estate property types and regions to 20151)

North AmericaUp: MexicoUSA

North AmericaStable:

Canada

Europe -Down:

  • Denmark
  • Spain
  • Russia

Europe - Stable:

  • Czech Republic
  • Netherlands
  • Sweden
  • Switzerland

  • UK

  • AsiaStable:Singapore

  • Down:China

  • Europe- Up:

  • Belgium
  • FinlandPoland

Italy

  • FranceTurkey
  • Germany

Main drivers of RoE improvement

Net interest income stable or slightly increasing until 2012.In normalised markets under pressure due to lower margins.

Loan loss provisions to improve over time

Net commission income to increase driven by international business of Aareon and maturity of SoFFin bonds

Admin expenses decreasing due to efficiency and cost cutting measures

Pre-tax RoE in normalised markets: ≥12%

Appendix

Group figures 2010Asset quality

Aareal Bank GroupKey figures 2010

0
1.
0
1.-
3
1.
1
2.
2
0
1
0		 0
1.
0
1.-
3
1.
1
2.
2
0
0
9		 C
ha
ng
e
Eu
ro
mn		 Eu
ro
mn
f
i
Pr
t a
d
lo
t
o
n
ss
a
cc
ou
n
Ne
in
inc
t
te
t
res
om
e		 5
0
9		 4
6
0		 1
1
%
A
l
low
for
d
i
los
t
an
ce
c
re
se
s		 1
0
5		 1
5
0		 3
0
%
-
Ne
in
in
f
l
lo
fo
d
i
lo
t
te
t
te
t
re
s
co
m
e
a
r a
an
ce
r c
re
ss
es
w		 4
0
4		 3
1
0		 3
0
%
Ne
iss
ion
inc
t c
om
m
om
e		 1
2
3		 1
3
3		 8
%
-
Ne
l
he
dg
ing
t r
t o
t
es
n
e a
cc
ou
n
u		 -2 2
-		 -
Ne
d
ing
inc
/ e
t
tra
om
e
xp
en
se
s		 8 4
4		 8
2
%
-
Re
l
fro
d
ing
ts
tra
ts
su
m
no
n-
a
ss
e		 -1
2		 2
2
-		 -
fro
for
Re
l
ies
d
i
ts
te
t e
ty
su
m
co
mp
an
a
cc
ou
n
a
q
u		 5 1 4
0
0
%
fro
Re
l
inv
ies
ts
tm
t p
t
su
m
es
en
rop
er		 -1
7		 0 -
A
dm
in
is
ive
tra
t
ex
p
en
se
s		 3
6
6		 3
6
1		 1
%
Ne
he
ing
inc
/ e
t o
t
t
r o
p
era
om
e
xp
en
se
s		 -9 1
4
-		 -
Im
irm
f g
dw
i
l
l
t o
p
a
en
oo		 0 2 -
Op
in
Pr
f
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t
t
er
a
g
o		 1
3
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4
%
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tax
om
e
es		 4
0		 2
0		 1
0
0
%
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/
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t
co
m
e
ss		 9
4		 6
7		 4
0
%
io
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A
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lo
t
l
ts
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o
es
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/
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inc
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b
le
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ing
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t
t
tr
ta
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te
ts
om
e
s
a
no
n-c
on
res		 1
8		 1
8		 0
%
/
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Ne
inc
los
i
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le
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f
Aa
l
Ba
k
A
t
t
tr
ta
to
om
e
s
a
s
re
rs
o
rea
n		 7
6		 4
9		 5
5
%
Ap
ia
io
f p
f
i
t
ts
p
ro
p
r
n
o
ro
S
So
i
len
h
ip
i
bu
ion
by
F
F
in
t p
tn
tr
t
ar
ers
co
n		 3
0		 2
6		 1
%
5
Co
l
i
da
d
in
d
f
i
/ a
la
d
lo
te
ta
t
te
ns
o
re
e
p
ro
cc
um
u
ss		 4
6		 2
3		 1
0
0
%

Aareal Bank Group: Segment Reporting Key figures 2010 by operating units

S
tru
c
Pr
op
F
in
an		 tu
d
re
ty
er
in
c
g		 Co
ns
u
Se
rv		 l
in
/
t
g
ice
s		 Co
i
l
ns
o
Re
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nc
O
t		 io
/
da
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n
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/
t
n
he
r		 Aa
re
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ou
p
3
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1
2.
2
0
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2.
2
0
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2.
2
0
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1.
1
2.
2
0
0
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1.
1
2.
2
0
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2.
2
0
0
9		 3
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1
2.
2
0
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1.
1
2.
2
0
0
9
Eu
ro
mn
Ne
in
inc
t
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om
e		 4
6
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1
0		 0 0 4
2		 5
0		 5
0
9		 4
6
0
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low
for
d
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los
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ce
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se
s		 1
0
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0
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0
5
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me
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r a
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r c
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ss
es		 3
6
2		 2
6
0		 0 0 4
2		 5
0		 4
0
4		 3
1
0
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iss
ion
inc
t c
om
m
om
e		 -9 1 1
6
7		 1
8
4		 4
4
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5
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2
3		 1
3
3
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l
he
dg
ing
t r
t o
t
es
n
e a
cc
ou
n
u		 -2 2
-		 -2 2
-
Ne
d
ing
inc
/ e
t
tra
om
e
xp
en
se
s		 8 4
4		 8 4
4
Re
l
fro
d
ing
ts
tra
ts
su
m
no
n-
a
ss
e		 -1
3		 2
2
-		 1 0 1
2
-		 2
2
-
fro
for
Re
l
ies
d
i
ts
te
t e
ty
su
m
co
mp
an
a
cc
ou
n
a
q
u		 5 1 0 5 1
Re
l
fro
inv
ies
ts
tm
t p
t
su
m
es
en
rop
er		 -1
7		 0 -1
7		 0
A
dm
in
is
ive
tra
t
ex
p
en
se
s		 2
1
7		 2
0
1		 1
5
2		 1
6
3		 3
-		 3
-		 3
6
6		 3
6
1
Ne
he
ing
inc
/ e
t o
t
t
r o
p
era
om
e
xp
en
se
s		 9
-		 1
2
-		 1 1
-		 1
-		 1
-		 9
-		 -1
4
Im
irm
f g
dw
i
l
l
t o
p
a
en
oo		 0 2 0 0 2
Op
in
f
i
t
t
er
a
g
p
ro		 1
0
8		 6
7		 2
6		 2
0		 0 0 1
3
4		 8
7
Inc
tax
om
e
es		 3
2		 1
3		 8 7 4
0		 2
0
/
Ne
in
lo
t
co
me
ss		 7
6		 5
4		 1
8		 1
3		 0 0 9
4		 6
7
A
l
lo
io
f r
l
t
ts
ca
n
o
es
u
/
Ne
inc
los
i
bu
b
le
l
l
ing
in
t
t
tr
ta
to
tro
te
ts
om
e
s a
no
n-c
on
res		 1
6		 1
6		 2 2 1
8		 1
8
Ne
inc
/
los
i
bu
b
le
ha
ho
l
de
f
Aa
l
Ba
k
A
G
t
t
tr
ta
to
om
e
s a
s
re
rs
o
rea
n		 6
0		 3
8		 1
6		 1
1		 0 0 7
6		 4
9

Aareal Bank Group: Segment Reporting Key figures - quarter by quarter

Str
uct
d P
ert
ure
rop
y
Fin
cin
an
g		 Co
ltin
/ S
ice
nsu
g
erv
s		 Co
/
lid
ati
nso
on
Re
ilia
tio
n /
Ot
he
co
nc
r		 Aa
l B
k G
rea
an
rou
p
Q4 Q3 Q2 Q1 Q4 Q4 Q3 Q2 Q1 Q4 Q4 Q3 Q2 Q1 Q4 Q4 Q3 Q2 Q1 Q4
20
10		 20
10		 20
10		 20
10		 200
9		 20
10		 20
10		 20
10		 20
10		 200
9		 20
10		 20
10		 20
10		 20
10		 200
9		 20
10		 20
10		 20
10		 20
10		 200
9
Eu
ro
mn
Ne
t in
in
ter
est
com
e		 129 121 111 106 103 0 0 0 0 0 10 10 11 11 12 139 131 122 117 115
e fo
All
red
it lo
ow
anc
r c
sse
s		 8 32 33 32 35 8 32 33 32 35
Ne
t in
in
af
ter
est
ter
co
me		 121 89 78 74 68 0 0 0 0 0 10 10 11 11 12 131 99 89 85
all
fo
red
it l
ow
an
ce
r c
oss
es		 80
Ne
t c
mis
sio
n in
om
com
e		 1
-		 5
-		 1 4
-		 2 49 39 43 45 50 11
-		 10
-		 12
-		 11
-		 -13 37 24 32 30 39
Ne
lt o
n h
edg
ing
t re
unt
su
e a
cco		 4
-		 2
-		 2 2 1 -4 2
-		 2 2 1
Ne
adi
inc
e /
t tr
ng
om
ex
pen
ses		 13 2 13
-		 6 3 13 2 13
-		 6 3
Re
lts
fro
din
-tra
ts
su
m
non
g a
sse		 23
-		 4
-		 14 0 3
-		 0 1 0 0 -23 3
-		 14 0 3
-
Re
lts
fro
ani
su
m
co
mp
es		 0 0 5 1 0 0 0 5 1
ted
fo
r at
uity
acc
oun
eq
Re
lts
fro
inv
est
nt
su
m
me
rtie
pro
pe
s		 -17 0 0 0 1
-		 -17 0 0 0 1
-
Ad
min
istr
ativ
e e
xpe
nse
s		 56 54 55 52 42 40 35 38 39 42 1
-		 1
-		 1
-		 0 1
-		 95 88 92 91 83
e /
Ne
t o
the
atin
inc
r o
per
g
om
exp
ens
es		 -2 2 7
-		 2
-		 10
-		 0 0 1 0 2
-		 0 1
-		 0 0 0 2
-		 1 6
-		 2
-		 12
-
Imp
airm
of
dw
ill
ent
goo		 0 0 2 0 0 0 0 2
Op
tin
rof
it
era
g p		 31 28 25 24 17 9 5 6 6 6 0 0 0 0 0 40 33 31 30 23
Inc
e t
om
axe
s		 8 10 7 7 3 3 1 2 2 2 11 11 9 9 5
Ne
t in
/ l
co
me
oss		 23 18 18 17 14 6 4 4 4 4 0 0 0 0 0 29 22 22 21 18
All
ati
of
lts
oc
on
re
su
e /
Ne
t in
los
ttri
but
abl
e t
com
s a
o
olli
inte
ntr
ts
non
-co
ng
res		 4 4 4 4 4 0 1 0 1 1 4 5 4 5 5
Ne
t in
e /
los
ttri
but
abl
e t
com
s a
o
sha
reh
old
of
Aa
l B
ank
AG
ers
rea		 19 14 14 13 10 6 3 4 3 3 0 0 0 0 0 25 17 18 16 13

Net interest incomeHigher margins "paying off"

NII Consulting / ServicesNII Structured Property Financing

  • Net interest income Q4 2010: € 139 mn
  • Net interest income influenced by
    • SPF-business: Mainly results from higher margins
    • Consulting / Services: Historically low interest rate level still burdens the deposit taking business

Loan loss provisionsLoan loss provisions proving high portfolio quality

  • Full year loan loss provisions of € 105 mn stays clearly below the given range of € 117 mn to € 165 mn
  • Close monitoring of our loan portfolio and successful restructuring of several NPL cases results in only € 8 mn LLP in Q4
  • € 42 mn of the General Portfolio LLP of € 48 mn swapped into Portfolio LLP, release of € 6 mn
  • LLP within guidance even including burden of a non-recurring expense of € 20 mn, which was recognised for the realignment of an investment property

Net commission incomeCosts for additional SoFFin guarantee since Q3

  • Net commission income of € 123 mnincluding (or ~ € 153 mn without) costs of the SoFFin guarantee facility in 2010 is a good performance regarding the challenging environment
    • All quarters shown are burdened with ~€ 5 mn costs for the first SoFFin guarantee facility
    • The impact increases to ~€ 10 mnin Q3 and Q4 due to the additional SoFFin guarantee facility drawn at the end of Q2 (onto own book)
  • Positive seasonal effects of Aareon in Q4

Trading, non trading and hedge accountingReflects volatile markets in 2010

Result from the proactive management of our treasury portfolio and our consequently continued de-risking strategy

Admin expensesStill under control due to high cost discipline

  • Q4 2010-figures with € 95 mnslightly above the average of the other quarters 2010
  • Effected by first consolidation of Aareon's Dutch acquisition SG I automatisering bv (~€ 3 mn)
  • Admin expenses incl. higher costs for phantom share program (~€ 6 mn)
  • Efficiency measures still keeping the admin expenses under control

Appendix

Group figures 2010Asset quality

Western Europe (ex Ger) credit portfolioTotal volume outstanding as at 31.12.2010: € 5.4 bn

Southern Europe credit portfolioTotal volume outstanding as at 31.12.2010: € 4.1 bn

German credit portfolio

Total volume outstanding as at 31.12.2010: € 4.1 bn1)

Eastern Europe credit portfolio Total volume outstanding as at 31.12.2010: € 2.8 bn

Northern Europe credit portfolio Total volume outstanding as at 31.12.2010: € 2.8 bn

North America credit portfolio Total volume outstanding as at 31.12.2010: € 3.0 bn

Asia credit portfolioTotal volume outstanding as at 31.12.2010: € 1.1 bn

Revaluation reserve:Change mainly driven by asset spreads

From asset to risk weighted asset (RWA): Essential factors affecting volume of RWA

1) Excl. of market risk

2) Exposure to investment shares amounts to € 15 mn

Definitions and contacts

Definitions

Property Financing Portfolio

  • Paid-out financings on balance sheet
  • Incl. remaining property loans on DEPFA books

New Business

  • Newly acquired business incl. renewals
  • Contract is signed by customer
  • Fixed loan value and margin
  • Net RoE = Group net income after minority interestsAllocated (average) equity

Allocated Equity

Average of:

  • Equity (excluding minorities and revaluation surplus but including silent participation by SoFFin) start of period less dividends and
  • Equity (excluding minorities and revaluation surplus but including silent participation by SoFFin) end of period less expected dividends
  • CIR =Admin expenses Net income

Net Income

net interest income + net commission income + net result on hedge accounting + net trading income + results from non-trading assets + results from investments accounted for at equity + results from investment properties + net other operating income

Contacts

Jürgen Junginger Managing Director Investor Relations Phone: +49 611 348 [email protected]

Alexandra Beust

Director Investor RelationsPhone: +49 611 348 [email protected]

Sebastian Götzken

Senior Manager Investor RelationsPhone: +49 611 348 [email protected]

Disclaimer

© 2011 Aareal Bank AG. All rights reserved.

  • This document has been prepared by Aareal Bank AG, exclusively for the purposes of a corporate presentation by Aareal Bank AG. The presentation is intended for professional and institutional customers only.
  • It must not be modified or disclosed to third parties without the explicit permission of Aareal Bank AG. Any persons who may come into possession of this information and these documents must inform themselves ofthe relevant legal provisions applicable to the receipt and disclosure of such information, and must comply with such provisions. This presentation may not be distributed in or into any jurisdiction where such distribution would be restricted by law.
  • This presentation is provided for general information purposes only. It does not constitute an offer to enter into a contract on the provision of advisory services or an offer to purchase securities. Aareal Bank AG has merely compiled the information on which this document is based from sources considered to be reliable – without, however, having verified it. Therefore, Aareal Bank AG does not give any warranty, and makes no representation as to the completeness or correctness of any information or opinion contained herein. Aareal Bank AG accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation.
  • This presentation may contain forward-looking statements of future expectations and other forward-looking statements or trend information that are based on current plans, views and/or assumptions and subject to known and unknown risks and uncertainties, most of them being difficult to predict and generally beyond Aareal Bank AG´s control. This could lead to material differences between the actual future results, performance and/or events and those expressed or implied by such statements.
  • Aareal Bank AG assumes no obligation to update any forward-looking statement or any other information contained herein.

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